Shutdown

So this is a post which has little to do with technology or with business in general. It will mainly be an economics based piece looking at the US deficit.

The US government is in debt, and it’s not the small debt most consumers call credit card debt. This is equivalent to a normal persons mortgage on a £3 million mansion with an extra £60 thousand in personal loans ( it could be more than this but this is exaggerated). The US government, both congress and president Obama have been struggling with this issue since before Obama started his second term in office. Democrats want to keep certain programmes which have been seen as progressive in the sense that healthcare should be provided to those who can’t afford it. While Republicans are trying to push for lower taxes on the richest of the rich who already control a lot of the economy and get away with it.

The Obama healthcare or Obamacare as it’s dubbed by media is the first thing Republicans want to remove as it is a policy focused on low income families or those who are struggling and are on welfare. It’s quite shocking that in the UK, the National Health Service is provided to all for basic and complicated healthcare issues and that accommodates a country of below 70 million. It makes it much harder to have across the board healthcare in the USA as they have to focus on over 350 million residents. It will be much more costly if everything was provided in the USA.

The Democratic Party has had problems when it comes to their policy implementations. Obama being president has some powers but has to pass the major laws and policies through Congress, which is led by Republications. This causes a major power struggle for the President who wants to implement policies but is blocked. The best policy changes Obama has done in this presidency is the repeal of the Defence of Marriage Act and how same sex couples are allowed to marry in the state of California but that is more state law rather than Federal law.

What does this have to do with the debt limit? Well everything that Obama does or doesn’t do can effect the way in which he pushes for cost cutting measures come October 15th. The USA will be bankrupt as of 1st October as they have to make payments of $60 billion with only $30 billion in the kitty. The increase in the limit of the US debt is just a bandage on a gushing wound. With debt of over $13 trillion, the structural deficit will be focal point for budget cuts. The larger sum has been accumulated by all previous presidents and should not be Obama’s problem to completely irradiate. If Obama is able to push for higher taxes on the rich and super rich, he would be able to create larger revenues for the fiscal year, but he would need to compromise on something.

One solution to this is pay off debt with more debt. The US Treasury could issue super long term bonds with low interest rates in order to pay it’s current debt. This will be a short term fix, but it will allow the future presidents to worry about the debt issued today, so Obama wouldn’t have to think too much in that respect. The fact that the US government has made drastic cuts already to the budget especially for military personnel could just mean that the US Congress will not reach a decision this time either. One thing I personally feel the government could do it cut agricultural subsidies. It baffles me to think that governments subsidise agriculture when the products cultivated are then just stored in the millions. The US has got millions of tonnes of corn not being used because it is highly subsidised but then is re-engineered to become high fructose corn syrup causing cheap sugar to enter the US consumer market.